Definition of The Keynes Effect: As prices fall, a given nominal amount of money will be a larger real amount. Consequently the interest rate would fall and investment demanded rise. This Keynes effect disappears in the liquidity trap. Contrast the Keynes effect with the Pigou effect.

Another phrasing: The Keynes effect is that a change in interest rates affects expenditure spending more than it affects savings. (Econterms)

Terms related to The Keynes Effect:

• Liquidity trap
• Pigou effect